Answer:
100% of the 2nd monthly payment go toward the repayment of principal.
Step-by-step explanation:
The loan taken is the Principal which is mentioned as $72,500 with interest at a nominal rate of 20%. Firstly, it is important to understand that nominal rate means <em>non-compounding </em>rate. Simply put will be a "<em>one-time charged" </em>rate on the loan. Since this is given as 20% of the Principal. It is calculated thus: ×
= $14,500. So the interest on the loan is $14,500. Added to the Principal the total amount to be paid back by the company becomes: $72,500 + $14,500 = $87,000. To pay back this amount at equal end-of-month installments in 1 year (12 months), we divide the total amount by 12. i.e
= $7250. This means, the monthly payment will be $7,250. Since the monthly payment pays only 10% of the initial principal $72,500. By the second month only 20% of the Principal would have been paid. So all of the monthly payment will go towards repaying the principal
